EU at the Crossroads

Executive Summary

The European Union (EU) is facing one of its gravest challenges since it was founded as a coal and steel community in 1951. Great Britain’s decision to leave the EU in March 2019 is causing consternation as governments and businesses scramble to prepare for “Brexit,” unsure of its terms or even whether a formal agreement will be reached beforehand by London and Brussels. The EU also is coping with a trade dispute with the United States growing out of President Trump’s imposition of tariffs on imported steel and aluminum and his threat to add duties to European car imports. It is unclear whether a tentative truce worked out in July will hold. In addition, the EU is facing internal strains caused by nationalist and populist political parties pressing for greater limits on immigration, particularly for those seeking asylum. While European leaders reached a temporary accord on strengthening their external borders, they have yet to win agreement about where asylum centers will be established to screen migrants or how to stop refugees from taking to the seas to gain entry into the EU.

Key takeaways include:

One-third of all financial institutions in the United Kingdom are planning or considering relocating some operations to other European cities because of Brexit.

The International Monetary Fund has cut its growth projections for the 19 countries that use the euro currency because of uncertainty over the EU’s future.

A political backlash against migrants has weakened the authority of German Chancellor Angela Merkel, a leading voice supporting the liberal international order.

Castells, Manuel, et al., eds., “Europe’s Crises,” Polity, 2018. Economists, sociologists and political scientists discuss how the EU became embroiled in multiple crises and what can be done to resolve them.

Piris, Jean-Claude, “The Future of Europe: Towards a Two-Speed EU?” Cambridge University Press, 2012. A legal scholar who helped draft the EU’s structure concludes that the current organization is unworkable and proposes an inner core of countries that move faster toward political and economic union.

Articles

Golod, Vassili, “Austria’s Kurz wants ‘axis of willing’ against illegal migration,” Politico.com, June 13, 2018, https://tinyurl.com/y7kpmeluWhile Austria’s economy is small by European standards, its young conservative leader is gaining a continent-wide following for his tough approach to migration and European budgets, a journalist writes.

Parker, George, “Brexit chaos puts Conservatives on the edge of a breakdown,” Financial Times, July 14, 2018, https://tinyurl.com/ybmetbh3A British journalist provides a comprehensive account of Prime Minister Theresa May’s proposals for leaving the European Union and the likely points of friction with officials in Brussels.

Roubini, Nouriel, and Brunello Rosa, “Italy’s Slow-Motion Euro Train Wreck,” Project Syndicate, June 1, 2018, https://tinyurl.com/ycur2eptTwo experts offer a detailed analysis of Italy’s economic problems and why they are likely to get worse under the new populist government.

Reports and Studies

“The Effect of Imports of Steel on the National Security,” U.S. Department of Commerce, Jan. 11, 2018, https://tinyurl.com/y8r5wocbThis Commerce Department investigation provided the legal basis for President Trump’s imposition of tariffs on imported steel and aluminum on the grounds that steel imports posed a national security threat.

“The Future Relationship between the United Kingdom and the European Union,” Controller of Her Majesty’s Stationery Office, July 2018, https://tinyurl.com/yaxthtegIn this 98-page plan submitted to Parliament, British Prime Minister Theresa May lays out her compromise vision for Brexit.

“United Kingdom: Staff Concluding Statement of the 2017 Article IV Mission,” International Monetary Fund, Dec. 20, 2017, https://tinyurl.com/yc87n86bThe International Monetary Fund offers the most detailed look at the British economy on the eve of Brexit.

Blair, Tony, “The ‘In-Betweener’ Solution Is the Worst Of All Worlds: Parliament Should Reject It,” Tony Blair Institute for Global Change, July 15, 2018, https://tinyurl.com/ybs2rwrkThe former British prime minister accuses the government of bungling the Brexit process and says it should hold a second referendum on the issue.

“Migration from EU to UK lowest for four years, ONS figures show,” BBC, July 16, 2018, https://tinyurl.com/y85jjo62. Immigration from the European Union to the United Kingdom reached a low in 2017, the first calendar year since the Brexit vote, and a record number of EU citizens left Great Britain, according to the U.K. Office for National Statistics.

Hovet, Jason, and Robert Muller, “Migration concerns will dominate EU elections next year, Czech leader says,” Reuters, Aug. 1, 2018, https://tinyurl.com/yawkzt8u. The migration issue will be one of the deciding factors in next year’s EU parliamentary elections, and the vote will reveal a rising anti-immigration sentiment, Czech Prime Minister Andrej Babis predicted.

Post-Brexit Trade

“Brexit: EU ‘ready to improve’ Irish Border proposal – Barnier,” The Irish Times, Aug. 2, 2018, https://tinyurl.com/y9e53aq8. The European Union has signaled a willingness to be more flexible in negotiations with the United Kingdom over the post-Brexit border between the Republic of Ireland and Northern Ireland.

“Michel Barnier questions Theresa May’s Brexit White Paper,” BBC, July 20, 2018, https://tinyurl.com/y6wde4fv. Although the United Kingdom’s proposed trade plan with Europe is a good start, it still needs work and in its current form could pose a problem for the EU’s single market, the EU Brexit negotiator said.

“Post-Brexit butter and cheese restrictions possible even with trade deal, report warns,” The Caterer, July 18, 2018, https://tinyurl.com/ycgt6rhw. The United Kingdom could face post-Brexit shortages in dairy products it imports from the EU, according to a London School of Economics report.

European CommissionDirectorate-General for Communication. European Commission, Brussels, Belgium +32 2 299 11 11 https://ec.europa.eu/info/about-european-commission/contact_en Civil servants who carry out the daily business of the European Union, including Brexit, European finance, migration and others issues.